TNAG-0048-FCO40-84-Export-Credit-Insurance-Corporation-1968 — Page 53

CONFIDENTIAL

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they hold proferential loan stock instoad of oquity

sharos. There arcother ways in which the initial

shareholders' position can be secured by comparison with lator subscribers. (The lion on carnings mentioned in paragraph 5 will secure the samo ond after completion);

(a) the Hong Kong Government modifies its position on prior

charges on the income of the Tunnel Company. The Hong Kong Government is to receive payments under four main hoads:-

(i) charros for land;

(ii) royaltios (for land and compensation to the

forry companios);

(iii) rates; and

(iv) profits tax.

Since the assot will be created by the loan, H.M.G. would profor a prior charge on carnings for ropayment of the loan. Thoy aro proparod to accopt an equal position. In rocognition of the peculiar difficulties about rates and taxes, H.M.G. are prepared to allow those to have first charge, the loan to rank socond for a liko amount and thon oqually with the Hong Kong Government on (i) and (ii) above until one or the other is satisfiod.

(cto: If fresh priority categories are clained by the

Hong Kong Government, wo will consider thon);

(c) the Hong Kong Government undertake to ensure that financo is made available to completo the contract if costs were to incroaso. This might be by increase in subscribed capital borrowing or otherwise. No increase boyond £10 million will bo agrood in any circumstances in the loan guarantood by 3.C.G.D. But H.M.G. must be assured that the project will be completod. E.C.G.D. normally sock sono such assurance unless the borrower's assots are clearly sufficicnt for contingencies. The World Bank similarly sock such

assurance;

(f) the Export Crodits Guarantee Department arc satisfiod as

to the contractual details (soo paragraphs 7 and 8 below);

(g) in the ovont of the guarantoo being callod, tho Hong Kong

Government will exercise its best endeavours to recover payment from the Tunnel Company and any suns recovered shall bo shared equally botwoon the Government of Hong Kong and

H.M.G.

CONFIDENTIAL

/7. E.C.G.D.